If the economy is at potential output and the Fed increases the money supply, the aggregate demand will likely decrease in the short run.

Name: If the economy is at potential output and the Fed increases the money supply, the aggregate demand will likely decrease in the short run.
Brand: Quizplus
Rating: 4.9 (43 reviews)

Question

Quizplus · Accepted Answer

If the economy is already at potential output, then the Fed increasing the money supply would not have any effect on output or aggregate demand in the short run. However, it may lead to inflation in the long run.

If the Economy Is at Potential Output and the Fed